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The Joy of An Ex - Property Division

06th June 2011
By Jackie Rahmler in Family Law
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Copyright (c) 2011 Jackie Ramler

The Family Law Act was passed in Ontario in March 1986. The law provides the framework for a sharing of the value of assets during a marriage for spouses who are married to each other or who have entered into a marriage that is avoidable or void in good faith on the part of a person relying on the right to obtain a division of property. (Is the marriage "avoidable"? "Void"? Need some clarification.)A different set of law and legal principles applies in Ontario if there is a common-law relationship.

Property Division

The Family Law Act is the legislation that applies in the province of Ontario to the division of property between spouses upon a marriage breakdown, including separation or death, if a spouse is not provided for adequately in the deceased spouse's last will and testament. The surviving spouse may elect for the division of net family property within six months of his or her spouse's death, or during cohabitation if one of the spouses is improvidently depleting the assets.

The philosophy of the Family Law Act is that, subject to certain exceptions, any financial growth during the marriage is to be shared equally by both spouses. Accordingly, upon marriage breakdown (normally separation or death), a calculation is done separately for each spouse to determine the growth in value of that spouse's assets during the marriage (called that spouse's "net family property"). The Family Law Act then prescribes that a payment be made by one party to the other (called "an equalization payment") to provide for equal financial growth during the marriage. Simply put, the spouse with the higher net family property would then pay the spouse with the lower net family property one-half of the difference between the two values, this being the equalization payment.

The spouse whose net family property is the lesser of the two net family properties is entitled to one-half of the difference.

The division of net family property under the Family Law Act does not give a spouse a right to a specific asset, only the right to an equalization of net family property through money's worth, or an exchange of assets as agreed between the spouses. There is no actual sharing of property and each spouse is entitled to retain whatever property he or she owns, subject to the requirement that at the end of the day one spouse may have to make a cash payment, or an agreed transfer of property in lieu of cash payment, to the other spouse. There are exclusions of certain types of property such as inheritances received by a spouse during the marriage and special rules apply to the matrimonial home, namely, the home that the spouses live in on the date of the separation (or death, if the surviving spouse elects within six months of the death of his or her spouse to take under the Family Law Act rather than the will of the deceased spouse.)

The payment owing from one spouse to the other is arrived at as follows:

1) To oversimplify, the net value of all property each of the spouses own at the date of separation (or death), less the net value of all property each of the spouses owned at the date of the marriage (i.e. your "net family property") is equalized.

2) The spouse with the higher net family property pays the spouse with the lower net family property one-half of the difference between the two. This is called an "equalization payment".

3) To ascertain you and your spouse's net family property, a mathematical calculation occurs. It is typically set up as a balance sheet with the value of your property on one side and the value of your spouse's property on the other. The procedure is as follows:

All property each of you owns at the date of separation (or death) (including RRSP's, pensions, contingent interests, shareholdings and so on) is valued. Expert assistance from actuaries, business valuators and real estate appraisers would be necessary to ascertain the correct values.


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